Health Savings Accounts and Long Term Care

HSA’s and Long Term Care

1. Focus on Financial Wellness2. Tax-Efficient Opportunities3. Long Term Goals for Asset/Wealth Management

2014 HSA Education – General Overview

What is an HSA Plan?

High Deductible Health Plan

Minimum $1,250/$2,500 deductible

Maximum $6,350/$12,700 out-of-pocketDeductible applies to all costs (except preventive)- Prescriptions- co-pays

No other coverage

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Health Savings Account

Triple-Tax Advantage

2014 Contribution Limits: $3,300/$6,550

Additional $1,000 Contribution allowed for age 55+

You own the account

Use for any qualified Health Care expense (IRS Pub 502)

The Health Savings Account

The HSA Advantage

Triple Tax Advantage

Contributions- Only when covered by an HSA plan

Growth

Distributions (for Health Care expenses)- At any time, while covered under any plan- Dental, Vision, and non-covered medical services (ex. Lasik) - Even in retirement- Long Term Care premiums- COBRA/Individual/Medicare (not including Medigap)plan premiums

The Health Savings Account

HSA Limitations

No other Medical/Prescription coverage while contributing (including FSA)

Age 65+ may not contribute if enrolled in Medicare (A or B)

No individual limit on the family deductible

Non-qualified withdrawals Over age 65: normal withholding Under age 65: normal withholding + 20% penalty

Creditable Coverage requirements for Medicare Part D are not always met under an HSA plan

Comparison of Traditional and HSA Compatible Medical Plans

Plan Feature Traditional Plan HSA Compatible Plan

Preventive Care Covered at 100% Covered at 100%

Routine Care (non-preventive), such as office visits with your physician

Often covered at 100% after you pay a co-pay

Subject to the deductible – you pay 100% until you meet the deductible

Deductible Limits for a family

Individual limits added together = family deductible limit. No individual limits

Out of Pocket LimitsAfter you meet your “coinsurance maximum,” you continue to pay co-pays for office visits.

After you meet your out of pocket maximum, you have 100% coverage, even for prescriptions.

Who Should Participate?

Consider HSA if you: Prefer a lower monthly premium as a trade off for higher costs when you use care. Typically have low health care costs – your HSA can grow over time, helping you cover an unexpected medical expense in the future. Expect to meet your out of pocket maximum – in an HSA plan, there are no additional co-pays for office visits or prescriptions once you hit this limit.Have sufficient cash flow, or are willing to fund your HSA to cover out of pocket medical expenses while meeting your deductible. Would like the tax advantaged account, and are willing to keep good records.

Who Should Not?

Consider a Traditional Plan if you: Like the predictability of office visit and prescription drug co-pays. Do not have the cash-flow to fund your HSA or pay for an unexpected medical expense in full.Are a “medium user” of health care. With the higher deductible and the loss of co-pays, your out of pocket health expenses could be higher. Do not want additional recordkeeping or paperwork when you file your taxes.

HSA Compatible Plans with APC

Grandfathered Plans:• Priority Health HMO/HSA - Physicians• Priority Health POS/HSA – Physicians

Non-Grandfathered Plan:• Priority Health HMO/HSA – CRNA/Staff

HSA Compatible Plans

HMO/HSA - Physicians

POS/HSA - Physicians HMO/HSA – CRNA/Staff

Preventive Care

100% (not subject to Deductible)

Annual Deductible

$3,000/$6,000 $1,250/$2,500 (in-network)**$3,000/$6,000 (out-of-network)

$1,250/$2,500**

Out of Pocket Maximum

$5,000/$10,000 $2,000/$4,000 (in-network)$4,000/$8,000 (out-of-network)

$2,000/$4,000

** In 2015, the in-network deductible will increase to $1,300/$2,600

HSA Account Contributions

2014 Funding Limits

Single $3,300

Family $6,550

Catch-up (55+) $1,000 additional for each person

2015 Funding Limits

Single $3,350

Family $6,650

Catch-up (55+) $1,000 additional for each person

Flex Accounts

Flex and HSA Plans

If you enroll in an HSA Compatible Plan, there are special rules:

•You may not use the Flex Account for the first $1,250/$2,500 of deductible expenses

• Use your HSA or• Pay out of pocket

• After meeting your deductible, or for other expenses:• You must choose HSA or your Flex Account

Founders Bank – Health Savings AccountsGeneral Information

APC continues to partner with Founders Bank for Health Savings Accounts. All individuals have the option to use either Checking or Investment accounts.

• Eight percent (8%) of ALL HSA holders use an investment account.

• APC assumes Physicians will contribute the maximum amount allowed in each year to benefit from the triple tax treatment.

• The Fund options have been modified for 2014. They align with the Retirement funds with Fifth Third and also provide access to “Lifestyle/Target Dated” funds, both actively managed and well as index funds.

• Individuals may also choose to remain with their current investment choices.

Founders Bank – Health Savings Accounts Option Summary

Founders Bank – Health Savings Accounts MAUIWeb

One Time IRA Rollover to HSA Account

You are allowed to move money from your IRA to your HSA and avoid the taxation and penalties generally associated with early IRA withdrawals.

• You may do this once in your lifetime. • From a traditional IRA or Roth IRA• Only up to the Federal HSA limit for the calendar year.

Tax considerations: • HSA treatment – not deductible as an HSA contribution• IRA treatment – not a taxable distribution. After-tax basis dollars have special rules, as they cannot be transferred into the HSA.

See the HSA Resources handout for more information.

Estate Planning and Your HSA

General guidelines for your estate:

• Spousal beneficiaries can rollover the HSA account balance to his/her own account.

• Non-spousal beneficiaries: • The fair market value of the account is included in your

estate in the taxable year of death. • The beneficiary can deduct from the amount any qualified

medical expense not yet reimbursed from the HSA.

Tracking Expenses for current and future reimbursement

The HSA is the ONLY fully tax free mechanism for saving money.

Spenders: you use your HSA for every out of pocket medical expense.

Savers: you pay for all of your medical expenses from your daily budget and let your HSA grow.

Hybrid: you pay for smaller expenses, like office visits and prescriptions out of your daily budget and reserve your HSA for a large, unexpected expense.

No matter what kind of HSA account holder you are, save all of your medical receipts!

Tracking Expenses for current and future reimbursement

The advantage of being a “Saver”

• You can allow your account to grow (interest or mutual fund earnings) tax free.• There is no time limit for reimbursement. Expenses you have now can be filed away and reimbursed at any point in the future without tax consequences.

Remember – you need to be able to demonstrate actual medical expenses that match your distribution in the event you are audited. Keep your receipts!

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Health Savings Accounts Year End Forms

Form 8889 filed with Form 1040 with taxes

Form 5498-SA – Tells IRS what was contributed to HSA for the year

Form 1099-SA – Tells the IRS how much came out of the HSA for the year

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HSA Tax Forms – Form 8889File with 1040

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HSA Tax Forms – Form 5498 Contributions for the Year

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HSA Tax Forms – Form 1099-SAHSA Funds used during the Year

Questions?

616.459.1069

Lisa Murphy, CEBS, LIC

lmurphy@millsbg.com